Dana Sippel, CFP®, CPA/PFS

Dana Sippel, CFP®, CPA/PFS

When it comes to sailing, it is essential to always make sure all of the lines are secured. They need to be checked, double checked, even triple checked, to ensure a safe voyage. It is this kind of precision and attention to detail that make Dana Sippel not only an exceptional sailor, but has led him to build an experienced career in wealth management.

The biggest tax act in over 30 years was signed into law last December, and people are obviously focusing on the big changes to tax rates, deductions, and tax exemptions. But while there were a lot of changes, a lot of details have stayed the same—and you need to make sure they don’t slip through the cracks!

While everyone else is focusing on the changes, here are three unchanged tax strategies that you don’t want to forget about.

Security Cost Basis:

Under the current and continuing law, the security cost basis accounting method referred to as specific identification, allows investors to choose what shares of a stock, mutual fund or other investment holding to match against sales proceeds.  This provides investors flexibility to match the highest cost basis shares against a security’s sales proceeds, resulting in the lowest capital gain.  In most cases investors will also want to select shares have been held over 12 months, qualifying the transaction for preferential long-term capital gains rates.

Should investors be selecting securities to gift to charities, they will want to take the opposite approach. Instead they should select the shares that have the highest appreciation, while being held over 12 months.  Using these shares will provide a tax deduction at the fair market value, while escaping capital gains tax on the appreciation of the investment.  A slight change for 2018 – since many taxpayers will not be itemizing deductions after 2017, bunching charitable contributions by using a Donor Advised Fund will make sense for many.  Here’s more on Donor Advised Funds.

Capital Gains and Qualified Dividends:

Long-term capital gains and qualified dividends are still taxed at preferential rates of 0%, 15% and 20%.  These rates can be half or less than the ordinary income or short-term capital gain tax rates.  Prudent planning of your capital gains and dividends, taking long-term gains whenever possible and maximizing qualified dividends will help to minimize taxation of security income.  For some taxpayers, long-term capital gains and qualified dividends may actually incur no tax.  Please see the table below for the 2018 preferential tax rates under various incomes and filing statuses.   

Net Investment Income Tax (NIIT):

Although this tax did not change under the new tax act, it is worth reviewing as it can add an additional 3.8% tax to your investment income.  This tax applies to all passive investment income including dividends, interest, capital gains, rent and royalty income, and non-qualified annuities.  The NIIT tax can be a large piece of the total Federal tax burden, especially when considering preferential taxed investment income such as long-term capital gains and qualified dividends.  The additional 3.8% tax increases your Federal tax burden on preferential items up to 18.8% or 23.8%, depending on your total income.  The tax does not apply to wages, self-employment income, alimony, and Social Security income.  Keep in mind, this additional tax only applies if you are joint return filers with income over $250,000 or singles over $200,000.


The new tax law affects a number of broad strategies that savvy investors may pursue with their portfolios.  This article focused on the areas that remained the same as the prior tax law.  Please see Part I of this article to review some of the details that have changed.

Of course, each family’s specific circumstances will determine what strategies make sense for their situation.  Please contact us if you have questions about your specific circumstances.